One-stop sweet shop

No longer an afterthought, retailers are turning the in-store bakery into a destination with the delicious desserts customers demand.

By Elizabeth Louise Hatt

Knowing that many of us are in need of a late-afternoon sugar rush, there is a cupcake truck that parks outside the offices of Grocery Head­quarters on a fairly regular basis. It serves a variety of $3 cupcakes as well as packages of fresh baked cookies. It is one of many that dot the streets of New York.

The surge of independent bakeshops and dessert trucks has introduced a new level of competition for grocery stores. In-store bakeries can no longer rely on the convenience factor to get the attention of consumers. They must offer products and services that can rival the quality and unique offerings of independent bakeshops. “It’s been a mixed blessing,” says Chip Potter, marketing director for Jackson, Mich.-based Dawn Food Products, Inc.

“On one hand, shoppers have an alternative place to shop, but on the other hand independent bakeries generate new ideas that can be leveraged by in-store bakeries.”

To stay on the forefront, in-store bakeries must present a competitive selection of goods that meet shoppers’ expectations. Baked goods manufacturers are listening to consumers’ demands: breads are being made with simpler ingredients, cupcakes are taking on novel flavors and photo-worthy cakes are decorated with the characters and designs seen in store windows—and they all come ready for quick purchase.

The other half of the equation is turning the in-store bakery into a destination stop. To do so, Potter says retailers need to recognize consumers’ four needs: craving, connection, celebration and convenience. “For example, we know 55% of cookies are purchased to be shared with a spouse or significant other, so retailers can merchandise them as a ‘date night treat,’” he says.

Fresh look
While quality products will keep consumers coming back, in-store bakeries are working to attract the attention of first-time shoppers, prompting a number of grocery stores to redesign their bakery departments to create a fresh look. “The more the bakery looks like it is a market unto itself, an area dedicated to baking with wooden carts and stands, the more they are going to draw customers in,” says Ray Martin, vice president of sales and marketing for Effingham, Ill.-based Hodgson Mill. “You want customers to feel like they are walking through different markets as they pass through the various parts of the store—a patisserie, a boulangerie, etc. It feels like shopping in Europe because each department is segregated.”

The highlight of every birthday party is the cake—especially for kids—so retailers who put their best cake designs on display can grab attention, according to industry observers. Officials at DecoPac, the Anoka, Minn.-based company that supplies decorating kits to in-store bakeries, stay ahead of the game by licensing kids’ favorite cartoon characters and superheroes. “Most people celebrate with cake,” says Laura Griffith, licensing and marketing manager for DecoPac. “When the economy was in a recession, some people went without party goods or decorations in order to cut back, but they never cut back on the cake.”

Company officials say the kits include everything the baker needs to create cakes with characters from Disney, Nickelodeon, Marvel, NFL and Dreamworks. “Ninety-four percent of baked goods are still purchased at supermarkets. The licensed products are really big in supermarkets,” says Griffith, ad­ding that it allows for exciting cross-merchandising oppor­tu­nities. “We do cross-promotions with DVDs where consumers purchase a DVD and get $2 off a six-pack of cupcakes or a cake.”

One of DecoPac’s latest creations is the cupcake cake—a cake made out of cupcakes that pulls apart making it easy to serve. “Cupcakes appeal to every age; it doesn’t matter if you are a small child or an adult. The popularity of cupcakes comes from an element of nostalgia combined with what’s going on in the marketplace,” adds Griffith.

DecoPac is not the only company targeting kids: Rich’s Products, based in Buffalo, N.Y., offers kid-friendly themes and provides retailers with the promotional pieces. The most recent theme, Cupcake Island, features beach and sea animal tie-ins.

Rich’s has found that its target market has skewed towards a younger shopper interested in more contemporary designs and flavors. The company recently launched a berry cake with lemon whipped icing that is available through both its component program and in a finished format. “We are trying to reach consumers under 35 years old,” says Deanne McDonell, segment marketing manager for the in-store division. “We look at blankets, pillows and furniture trends for inspiration. We also look at paint companies to see what color combinations they come up with. Our whipped icing line focuses on contemporary designs like polka dots and stripes.”Bite-sized delights
Cupcakes have led the way for other downsized desserts. “There is definitely a trend towards bite-sized. People are cutting back but they still want an indulgence,” says Sabrin Dutta, consumer insights manager for Tucker, Ga.-based CSM Bakery Products, a division of CSM Global. “Whether a result of the economy, health concerns or both, people are also trading down large birthday cakes for smaller options.”

As consumers embrace value but also look for indulgent treats, Dawn Products has added 5- and 7-inch cakes and expanded its cake flavors into other categories such as red velvet cookies, muffins, cake donuts and a pumpkin white chocolate chip cookie for the fall. “The trend around comfort foods continues to grow and we’ve responded with home-style single-layer cakes, new muffin flavors like oatmeal apple and new cake flavors such as S’mores and mint chocolate,” says Potter.

“We’ve been seeing some retailers suggesting alcohol pairings for their desserts. For example, carrot cake is paired with sherry,” says Alan Hiebert, education information specialist with the International Dairy·Deli·Bakery Association (IDDBA), a trade association based in Mad­ison, Wis.

Whole grain goodness
According to IDDBA officials, fresh bread is the most popular item at in-store bakeries and outsells other categories by more than three to one. It continues to grow as people look for healthier all-natural op­tions. “A lot of consumers who buy fresh baked bread deem it to be healthier—and in most instances it is,” says Hodgson Mill’s Martin. “The consumer is getting smarter and they are raising children to be more knowledgeable. They will be moving away from ingredients they don’t understand.”

Officials at Chabaso Bakery, based in New Haven, Conn., have recognized an increase in demand for whole grains. “It’s a combination of consumers learning more about the health benefits and companies making better tasting products” says Dorothy Radlicz, director of marketing. “Even kids love our whole grain breads. We do a lot of in-store sampling and kids will taste it and get their mom to buy it.”

Radlicz says in-store demonstrations have been successful. “We created single packages of our garlic sticks to give out in stores during store openings, re-openings and other events. We want the customer to try the bread and see what the ingredients are,” says Radlicz. “That’s what gets them to buy it.”